A view of the Vinh Loc B apartment project in Ho Chi Minh City, which has been converted from a commercial project into social housing

Many developers have entered the social housing sector, which is supported by the government, but experts warn that they fierce competition from low-cost commercial housing, which have lower prices and better locations and involve little red tape.

"Without careful consideration of the market demand, the current mass development of social housing could bring sales to a standstill in future," deputy chairman of the Vietnam Construction Federation Pham Sy Liem, said.

Supply of social housing is expected to rise sharply in the next few years when many under-construction projects are finished, he said.

Of 167 projects, 34 with 19,000 units are complete, and the rest are expected to hit the market over the next few years.

The government supports developers by providing the land and allowing them to make a guaranteed 10 percent profit.

The 167 does not include 50 commercial housing projects which had registered to convert into social housing as of late last August to avail government support. Involving a total investment of around VND20 trillion ($952.4 million), they are expected to enter the market in a year or two with some 34,000 units.

The government allowed the conversion to revive the property market but also to enable more low-income people to acquire housing.

The central bank unveiled in June a subsidy package of VND30 trillion ($1.43 billion), with 70 percent of it earmarked for certain categories of buyers and the rest for developers of social housing.

Low-income earners, government workers, and military personnel can borrow from designated banks at 6 percent interest for the first three years to buy apartments measuring less than 70 sq.m and costing no more than VND15 million per square meter.

But selling them is not going to be an easy task, according to the experts.

Dang Hung Vo, a former deputy minister of Natural Resources and Environment, said many commercial low-cost housing projects have lower prices and better location than social housing.

Many are offered for VND10 million per square meter compared to VND12-13 million for social housing, he said.

Developers of commercial housing are often private firms, who manage to cut production costs and are content with lower profits, while social-housing developers build on behalf of the government and so do not worry about costs.

Social housing is also harder to buy because of complex procedures, he said.

Home buyers have to get local authorities and employers to attest to their housing situation they should not own any other house - and income to prove they are eligible to buy. They are then not allowed to sell the house for five years. Buyers of low-cost housing, meanwhile, do not face such restrictions.

Besides, many social housing projects are located in far-flung areas with poor infrastructure, Liem said.

In Hanoi, for instance, most are located in the districts of Gia Lam, Tu Liem, and Ha Dong, 10-20 kilometers away from downtown.

In fact, dozens of buyers at two social housing projects in Ha Dong and Xuan Mai towns recently agreed to pay fines to return their apartments to the developers because of poor infrastructure and remote location, the media reported.

Only 80 percent of units in a social housing project in Xuan Mai are occupied though they were handed over to buyers since early last year.

Liem said social housing for low-income earners should not be built mechanically. "The government should support [investors of] low-priced commercial housing, and subsidize mortgages so that buyers can freely choose.

"This is the method that many countries use to successfully address the housing demand of low-income people," he said.

Home buyers pay 20 percent down and the rest in installments with the government subsidizing the interest.

Prices down, recovery expected

Minister of Construction Trinh Dinh Dung said the market is expected to recover this year since prices have fallen to affordable levels.

Vo said the low-income housing segment could recover in 2014. "This is a factor that can increase confidence in the market, creating a foundation for dealing with issues in the medium- and high-priced segments."

Vietnam's GDP growth is expected to accelerate to 5.8 percent this year from 5.42 percent last year.